Although it is unlikely the crisis in the U.S financial sector will send India in to a tailspin, there are still some vulnerabilities. The banking sector in India is of course fundamentally sound. However there are chances for these firms holding a chunk of the so called toxic mortgage related securities. The securities -collateralised debt obligations, collateralised loan obligations and structured investment vehicles -had fallen steeply in value as a result of the U.S sub-prime mortgage crisis, triggering hefty write downs.
According to Morgan Stanley, slowing capital inflows in to emerging markets because of risk aversion will hit India the most. India has reported shortfalls in its trade account every month since April 2002.the deficit widened to a record $10.8 billion in July.
Foreign portfolio inflows accounted for 70 percent of the increase in total inflows in to India between 2006 and 2007.global funds bought a record $19.5 billion of Indian stocks and bonds in 2007, where they sold a net $6.7 billion in 2008 so far.
The ripple effects of the financial collapse are going to affect India as well. A number of investment banks have a lot of exposure in realty companies such as DLF and Unitech. The financial world is also much more interrelated because of the global banking relations. Thats why I suspect there would be a few causalities to the credit crisis in India also. The property asset bubble backed by the credit growth is another concern.
Tourism is another sector going to get a blow. Following the path of U.S, Briton and the Euro zones economic conditions are getting worse. 'Cutback' is the word we hears everywhere. Business travel, which has propped up the hotel industry amid a dip in demand from leisure travellers now looks ready to weaken.
No matter what the outcome of the bailout package is, India is going to see a slower economic growth and lesser foreign inflows for six to nine months. The rupee is going to hit 50 before finding any major support. That means below 11000 levels for Sensex.
Yasir.
According to Morgan Stanley, slowing capital inflows in to emerging markets because of risk aversion will hit India the most. India has reported shortfalls in its trade account every month since April 2002.the deficit widened to a record $10.8 billion in July.
Foreign portfolio inflows accounted for 70 percent of the increase in total inflows in to India between 2006 and 2007.global funds bought a record $19.5 billion of Indian stocks and bonds in 2007, where they sold a net $6.7 billion in 2008 so far.
The ripple effects of the financial collapse are going to affect India as well. A number of investment banks have a lot of exposure in realty companies such as DLF and Unitech. The financial world is also much more interrelated because of the global banking relations. Thats why I suspect there would be a few causalities to the credit crisis in India also. The property asset bubble backed by the credit growth is another concern.
Tourism is another sector going to get a blow. Following the path of U.S, Briton and the Euro zones economic conditions are getting worse. 'Cutback' is the word we hears everywhere. Business travel, which has propped up the hotel industry amid a dip in demand from leisure travellers now looks ready to weaken.
No matter what the outcome of the bailout package is, India is going to see a slower economic growth and lesser foreign inflows for six to nine months. The rupee is going to hit 50 before finding any major support. That means below 11000 levels for Sensex.
Yasir.